U.S. Assesses Russia’s WTO Compliance in Second Annual Report to Congress

Wednesday, December 31, 2014

Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative released Dec. 22 its second annual assessment of Russia’s compliance with its World Trade Organization commitments. The report reviews specific commitments that Russia undertook as part of its accession to the WTO as well as Russia’s implementation of those commitments. After an encouraging first year as a WTO member Russia has begun to show signs of backsliding during its second year and many protectionist tendencies appear to have gained momentum. The report indicates that Russia has pursued unjustified and retaliatory trade measures against many of its neighbors as well as the United States and rejected the core principles of open trade based on the rule of law.

On the positive side, Russia made a second round of tariff reductions in Aug. 2014 and has reduced customs fees, amended its rules on customs valuation, eliminated some import licensing procedures and lowered export duties consistent with its WTO commitments. However, the U.S. is concerned about certain tariff modifications pursuant to decisions of the Eurasian Economic Commission and is especially troubled by an Aug. 6, 2014 decision by Russian authorities to ban the importation of certain agricultural goods from the U.S. and other countries.

While Russia appears to have complied with its commitments in the area of domestic support to the agriculture industry, U.S. officials remain concerned about the country’s use of sanitary and phytosanitary measures. For example, although Russian authorities have issued guidelines for inspections of foreign meat processing and storage facilities U.S. officials believe the process to approve facilities for export to Russia remains difficult, if not impossible, to complete. Furthermore, Russia maintains certain SPS measures that do not appear consistent with international standards and has not provided WTO members with risk assessments for these measures that, for example, take into account available scientific evidence and risk assessment techniques developed by relevant international organizations.

The report also describes other non-tariff measures in Russia that can act as “behind the border” measures that favor domestically-produced goods. Russia appears to have resolved national treatment concerns raised by its automotive “recycling fee” but its increasingly protectionist postures in other areas have raised a number of WTO concerns. For example, Russia’s application of a levy on products that can be used to reproduce copyrighted material for personal use, as well as its value-added tax regime on royalties for cinema products, have raised concerns about potentially discriminatory treatment.

Other U.S. concerns outlined in the report include the comprehensiveness of Russia’s technical barriers to trade notifications and the delay in establishing a single TBT inquiry point, Russia’s inadequate enforcement of intellectual property rights especially with regard to online piracy and sales of counterfeit goods, and certain protectionist tendencies that are beginning to appear in Russia’s services sector.

The U.S. also paying close attention to such matters as the use of subsidies and price controls in Russia especially as they relate to titanium and natural gas, Russia’s introduction of domestic purchasing requirements that apply to state-owned and state-controlled enterprises, and preference programs for government purchases of products such as automobiles, satellite navigation systems, software, medical devices and pharmaceutical goods.

USTR plans to continue to closely monitor Russia’s implementation of its WTO commitments and intends to use all appropriate means to resolve any concerns.